U.S. Life-Sciences Startups Heed Calls From Offshore

For years, U.S. life-sciences startups have sought to avoid some of the problems in their industry–including a scarcity of investment funding and a sometimes-daunting regulatory process–by raising funding or commercializing overseas.

Nowadays, foreign organizations and governments are the ones making the overtures, hoping that American life-sciences companies can create jobs and stimulate the life-sciences industries in their countries.

ROMEO GACAD/Agence France-Presse/Getty Images

While far from being an ideal situation for the U.S. economy, the development has opened up new opportunities for life-sciences startups that are simply looking to stay afloat until they can commercialize, said Dale Wahlstrom, chief executive of Minnesota-based industry association LifeScience Alley.

“This is not something that’s going to re-catalyze the industry,” he said, “but it is something that can keep companies alive, for now.”

Wahlstrom, who was an executive with Medtronic for 25 years, said, “I’ve never seen a time when access to money was so difficult, or a time when there was so much energy among foreign organizations to try and develop medical-tech and biotech industries of their own.”

Saudi Arabia, Israel, Canada, Germany, Sweden, China, Japan and a handful of other countries feel a strong need to grow a life-sciences industry, he said.

“Plus, they smell blood in the water over here,” Wahlstrom said. “We have these delays in [Food and Drug Administration] approvals, as well as the new medical-device tax. We’re taxing companies for doing business in our country. These other countries are providing tax breaks, incentives and grants.”

LifeScience Alley is an industry group located in Minnesota, the hub of medical-technology companies in the U.S. Its leadership and membership are made up of executives from Medtronic, 3M, Abbott Laboratories, St. Jude Medical, Boston Scientific and other companies that together make up the ecosystem that startups seek to join.

The group has been in existence for 26 years, but Wahlstrom said it has fairly recently ramped up its program of sending members overseas to gauge the interest of foreign organizations in U.S.-based life-sciences companies.

Recently, the organization announced its first successful marriage between a foreign government’s desire to create jobs with an American startup’s need for cash, as implantable device maker Mardil Medical raised a $6.1 million Series C round led by an economic-development organization of the Malaysian government.

Malaysia wants Mardil Medical and other companies to conduct clinical trials in their country, as well as eventually make their technologies available to Malaysian doctors, Mardil said at the time.

LifeScience Alley is in the process of connecting a number of other companies to overseas funding and partnerships, but Wahlstrom said most details are still under wraps.

“Venture capital is still the preferred route,” he said, “But there just isn’t that much left. So, what do you do? Do you just roll over, and let everybody die? Or do you look for alternatives?”

Looking overseas for funding “is not the answer,” he said. “But it’s part of the answer. We are not trying to send our industry overseas, we are just looking for synergistic relations.”

LifeScience Alley–which works with American startups based outside of Minnesota as well as in the state–is expecting to announce a number of new funding deals in the coming months and years, he said.

Comments (1 of 1)

Options are always a positive development. The truth of the matter is the US will always be critical to scale as it represents typically 40% of revenue of a medical technology. With that said, sequencing events overseas makes sense in certain scenarios to gain commercial success while working hard to get FDA clearance/approval. We are doing different approaches with our MedTech Catalyst portfolio.

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